TRAVERSE CITY — An ad hoc committee made up of three county commissioners will explore options for the future of the debt-ridden Grand Traverse County Pavilions.
The county-owned nursing facility has been operating in the red since April. In addition, annual audits show operating losses of $2 million in 2020, $4.6 million in 2021 and $7.4 million in 2022.
The facility’s fund balance ran dry at the end of March and, as of mid-August, it has been borrowing about $3.5 million from the county under a voucher system to meet its expenses.
Options laid out by county Administrator Nate Alger include: having a little faith that the facility will pull itself out of its $3.5-million-and-counting financial hole; appointing an emergency manager; or liquidating the asset.
Grand Traverse County Commission Chair Rob Hentschel and commissioners T.J. Andrews and Darryl V. Nelson were unanimously appointed to the ad hoc committee.
Their task is to evaluate all the options regarding the Pavilions as laid out by Alger and bring that information back to the board.
Nelson said it was his intention to do a deep dive as there are a lot of questions and not a lot of answers, saying he sees a lot of smoke but doesn’t know where the fire is.
Andrews also was appointed as the liaison to the county Department of Health and Human Services board, which oversees the Pavilions.
Commissioner Penny Morris recommended that Andrews take her place as county liaison.
“She has a more detailed mind than mine and I think she’ll ask the right questions,” Morris said.
Both county and DHHS board members, including Morris, have said they were not aware of the financial problems at the Pavilions – or that the facility was borrowing from the county.
Pavilions CEO Rose Coleman has repeatedly said a reimbursement payment of more than $10 million is expected and it would likely come in September.
“I would have liked to have known about it sooner and I think every board member here would have liked to have known about it a lot sooner and in more detail,” Hentschel said. “How can we in the future, or maybe when none of us is here … how can we set up red flags that pop up so this does come to the attention of the elected officials running the county?”
The board approved a motion by Hentschel for county administration to draft a financial policy in which the board would be notified of any component units, such as the Pavilions, that are in a negative balance for more than 30 days.
At last week’s DHHS meeting, Rob Long of Plante Moran reported that $6.1 million in an Employee Retention Credit (ERC), which makes up the bulk of the reimbursement, may be denied by the IRS.
In addition, about $3.4 million owed to the facility in Medicaid reimbursement will come in two payments – $1.15 million this year and the rest at the end of next year.
Long is creating a plan to put the Pavilions back on solid financial footing and pay back the county. The plan is to be presented to the county board at its Sept. 20 meeting, although Alger asked for more time, if needed, since he will have an independent accounting firm go over the numbers.
Alger said he was provided with a gains and losses sheet that projected the facility would be back in the black by November.
“I have no confidence in that plan,” Alger said. “I don’t think they actually have confidence in that plan.”
Part of the plan includes raising room rates for those patients in independent and assisted living cottages and in a memory care unit. The rates were approved by the DHHS board and will go into effect in November and January.
Higher rates for private pay patients are already in place.
DHHS board Trustee Gordie LaPointe told county board members on Wednesday that, before getting into the solution, it needs to be understood how the Pavilions is different from other nursing homes and how it got into its current financial hole.
Funding for facilities that accept Medicare and Medicaid is complex, LaPointe said, and is something that is now being rectified with a process that will pay the facility the month after services are delivered.
The reimbursement money the Pavilions is waiting for comes from two and three years ago.
The plan needs to be based on realistic numbers and not what they might get, such as the ERC funds, he said.
Nursing homes have taken a hit, as they were unable to take new patients during the pandemic.
But there was an expectation that, after the pandemic, the situation would right itself and the numbers would go back to pre-pandemic levels. That hasn’t happened, he said.
“The last thing we want to do is come up with something that takes the heat off for a couple of months,” LaPointe said. “The plan has to be realistic, not optimistic or hopeful … That’s what we’ll be presenting on the 20th.”